EARNINGS PREVIEW: Online Brokers Off To Good Start In 2012
10 April 2012 - 1:21AM
Dow Jones News
TAKING THE PULSE: The major online brokers started off 2012 on a
high note, logging better-than-expected trading volume in January
and February as a solid stock-market rally and wave of encouraging
reports on the state of the global economy drew retail investors
off the sidelines. An improving interest-rate environment also came
as a relief, easing a bit of the low-rate pressure with which the
sector has long been dealing.
With an apparently strong quarter in the works, investors piled
into the major e-brokers, driving up the group's shares by an
average of 29%, according to analysts at KBW. Still, the firm notes
enthusiasm is being drawn mostly from "improved consumer and
investor sentiment rather than a substantial improvement in the
underlying fundamentals of the business."
COMPANIES TO WATCH:
Charles Schwab Corp. (SCHW) -- Reports April 16
Wall Street Expectations: Analysts are looking for a per-share
profit of 15 cents on $1.18 billion in revenue. Schwab, the largest
discount broker by market capitalization, last year reported
earnings of 20 cents a share on $1.21 billion in revenue.
Key Issues: Schwab has long been stuck with the task of waiving
some fees for its money market funds to ensure client yields don't
turn negative in an era of rock-bottom interest rates. Now that
headache finally seems to be receding somewhat as rates along the
yield curve have started to turn higher. Evercore analysts in a
note last month wrote the firm expects "incremental" improvements
in Schwab fee waivers for the quarters ahead, predicting they will
total $145 million in the first quarter, down from the fourth
quarter and below the $165 million to $170 million Schwab is
predicting.
TD Ameritrade Holding Corp. (AMTD) -- Reports April 17
Wall Street Expectations: Analysts expect a per-share profit of
25 cents on $672 million in revenue. A year ago, TD Ameritrade
reported earnings of 30 cents a share on $718.2 million in
revenue.
Key Issues: Investors will be looking for an update on the
brokerage's progress in adding new client cash, particularly as
Ameritrade has prided itself on growing its stock of customer
assets. Last quarter saw an increase in net new money over the year
earlier, although the sum was less than Ameritrade added in the
prior quarter. KBW analysts estimate new asset growth at the major
online brokers ran above expectations in the first three months of
the year, with Ameritrade appearing to lead the pack.
E*Trade Financial Corp. (ETFC) -- Reports April 19
Wall Street Expectations: Analysts are looking for a per-share
profit of 10 cents on $469 million in revenue, excluding loan-loss
provisions. A year earlier, E*Trade reported earnings of 16 cents a
share on $537.7 million in revenue.
Key Issues: For E*Trade investors, any update on the company's
loan book is just as important as trading volumes as E*Trade
continues to recover from bad bets made on the U.S. housing market.
With losses in the roughly $13 billion portfolio on the decline,
Wells Fargo last month raised its view on the stock, saying E*Trade
is leveraged to both an emerging recovery in the housing market and
among retail investors. "While uncertainty remains, we want to get
involved in the stock before it becomes obvious that housing has
completely recovered and/or that the retail investor is fully
engaged," the firm wrote.
-By Mia Lamar, Dow Jones Newswires; 212-416-3207;
mia.lamar@dowjones.com
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